antitrust policy

The Antitrust Religion still Has Many Adherents

by Ryan Young on July 31, 2009 · 1 comment

in Deregulate to Stimulate, Economy, Regulation

Here’s a letter I sent recently to the Financial Times:

July 29, 2009
Editor, Financial Times
1330 Avenue of the Americas
New York, NY 10019

From Mr Ryan Young.
Sir, Mario Monti’s call for harmonized and reinvigorated EU and U.S. antitrust policies (“Watchdogs of the world, unite!”, July 29) is misguided. Consumers are best served when competing firms concentrate on bettering themselves, rather than hobbling their rivals. Antitrust policy discourages the former, and encourages the latter. Why bother with the ongoing challenge of competing in the marketplace if one can merely go to Brussels or Washington?

The great irony of antitrust policy is that it reduces market competition whenever and wherever it is applied. Such is its very nature.

Ryan Young
Fellow in Regulatory Studies,
Competitive Enterprise Institute,
Washington, DC, US

How to End the War over Antitrust

by Ryan Young on July 27, 2009

in Deregulate to Stimulate, Economy, Regulation

The government is at war with itself over antitrust policy, according to the New York Times.

On one side we have Christine Varney, who heads the Justice Department’s antitrust division. On the other we have the Department of Transportation (over both airlines and rail policy), financial regulators, legislators from both parties, and some of President Obama’s advisers (but not all of them).

The reason for the infighting is that antitrust policy, by its very nature, is vague and arbitrary. If the Sherman and Clayton Acts were followed to the letter, all prices, all mergers, and all business agreements would be illegal. Therefore they aren’t followed to the letter.

Regulators instead must use their discretion. Different people have different discretions; of course they will disagree on the proper boundaries of antitrust enforcement. Hence the government’s war with itself.

There are two ways around this: either enforce the laws as they are written, or repeal them. A quick look at the laws is enough to make the case for repeal.

Suppose you charge a higher price than your competitors. You are abusing your market power and can be prosecuted. If you charge the same price as your competitors, then that is evidence of collusion; also prosecutable. If you charge lower prices than your rivals, then that is predatory pricing, intended to drive your rivals out of business so you can then raise prices and make monopoly profits. Prosecutable. Literally, all prices are illegal. No one is innocent.

Same with mergers. There are three kinds: horizontal, vertical, and conglomerate. Horizontal mergers are between direct competitors. Fewer competitors implies less competition. Prosecutable. Vertical mergers are between firms with a supplier-customer relationship, and can lead to undue market power. Prosecutable. Conglomerate mergers unite unrelated, non-competing firms. By raising barriers to entry in multiple markets, they are prosecutable. All mergers fall under at least one of the three categories. All are technically illegal.

This is absurd, obviously. Companies have to charge prices. And even the most hawkish antitrust advocate knows that some mergers can actually increase efficiency and competitiveness. So the government doesn’t enforce antitrust statutes literally. Individuals pick and choose which companies to go after, and different people pick and choose differently.

If the executive branch is not going to consistently enforce antitrust laws — and they shouldn’t — they should be repealed.

In Which the Case for Antitrust Action against Telecoms Weakens

by Ryan Young on July 20, 2009

in Deregulate to Stimulate, Economy, International, Legal, Regulation, Tech & Telecom

New research from the American Consumer Institute, using FCC and OECD data, finds that U.S. telecoms are charging, on average, ten cents less per minute than their counterparts around the world. Evidence, it seems, of a healthy competitive process.

Tell me again why antitrust authorities are investigating telecoms?

Antitrust Irony

by Ryan Young on July 8, 2009

in International, Legal, Regulation, Tech & Telecom

Two interesting stories in the news this morning.

Microsoft is having a tense antitrust discussion with the EU.

Meanwhile, Google is readying an operating system to directly compete with Windows.

Compare and contrast.

Antitrust Policy and Telecoms

by Ryan Young on July 7, 2009 · 3 comments

in Economy, Regulation, Tech & Telecom

When Christine Varney took over the Justice Department’s antitrust division, she promised an era of vigorous enforcement. She is beginning to deliver. Intel, Google, airlines, pharmaceutical companies, and now telecoms are all facing close scrutiny.

There are two issues in play for telecoms. One is firm size. AT&T and Verizon together account for 60% of cell phone subscriptions. But as attorney Donald Russell told The Wall Street Journal, “You don’t have any firm that’s in a dominant position.”

It’s hard to make a case that a company is abusing market power if it doesn’t really have any. And Verizon and AT&T are not exactly Standard Oil.

The other issue is networks making exclusive deals with equipment makers. If you want an iPhone, you have to use AT&T’s service. If you want a Blackberry Storm, you have to use Verizon. Smaller competitors allege that exclusive deals for coveted phones are shutting them out of the market. Antitrust enforcers tend to agree.

I don’t; the iPhone has spawned more than 30 competing devices. And the iPhone itself has dropped in price from $500 to as low as $99. Where’s the lack of competition?

Justice is only investigating telecoms so far. Consumers should hope that Justice’s fishing expedition doesn’t result in further actions. Antitrust policy hinders the competitive process far more than it helps it.